In many states, tax and expenditure limits constrain government spending. All but one state have adopted balanced-budget rules. Some governors have the power to veto individual budget items (the so-called line-item veto). This article reviews the evidence linking fiscal and political institutions to state taxation, spending, and debt. It appears that properly designed fiscal and political insti...

Governments use national debt and the budget deficit as measures of fiscal position. But what should government policy aim to achieve with respect to these measures? Are these the right summary measures at which to be looking? This paper considers what the government should use as its fiscal targets to achieve policies that are consistent with long-term fiscal objectives. Among its findings are...

The global financial crisis of 2008–09 has sent public debt on sharply higher trajectories, as governments have provided large-scale support to the financial system, implemented discretionary fiscal stimulus, and accommodated steep drops in tax revenue. With the economic recovery gradually taking hold, the focus is now shifting to fiscal “exit strategies.” Indeed, many countries are set to face...

The existing literature on political budget cycles looks at the temptation for incumbent governments to run a greater deficit before an election by considering the characteristics of the incumbent. We propose here to look at the signals the incumbent receives from the voters. For this purpose, we consider the votes from the previous national elections and see whether they may influence the incu...

Appealing to the twin deficit hypothesis, according to which shocks to the government budget move the current account in the same direction, many observers call for fiscal consolidation in the US as a necessary measure to reduce the large external imbalance of this country. We reconsider the international transmission mechanism in a standard two-country two-good business cycle model, and find t...

This paper investigates the effects of fiscal policy on the trade balance using a structural factor model. A fiscal policy shock worsens the trade balance and produces an appreciation of the domestic currency but the effects are quantitatively small. The findings match the theoretical predictions of the standard Mundell-Fleming model, although fiscal policy should not be considered one of the m...

budget deficit constitutes a major fiscal indicator. it has major important ramification on macro-economic position of all nations. in developing countries generally, and in iran specifically, governments are likely to spend more on miscellaneous as well as differentiated obligations causing high expenditure costs with respect to their limited revenues. this causes a budget deficit to incur. th...

This paper examines the idea that the rate of inflation tends to increase nominal government expenditures faster than government revenues. it concludes that while government expenditures rise concurrently with inflation, real government revenues tend to fall based on collection tags. Empirical results using time series data for Iran support our expectations in which the longer is the delay in g...